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These SPX Utilities Could Gain You More than 10% from Here

Vineet Kulkarni - Author

Nov. 20 2020, Updated 10:56 a.m. ET

Handsome potential upsides

US utilities have risen nearly 12% year-to-date and surpassed broader markets. Very few utility stocks offer handsome potential upside going forward. In this series, we’ll discuss utility stocks from the S&P 500 Utilities Index (XLU) that are offering more than 10% potential gain from their current price levels.

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Price targets

The largest merchant power producer, NRG Energy (NRG) has an implied gain of 30% from its current level of $23.4. Wall Street analysts gave NRG Energy a mean target price of $30.4.

Activist shareholders’ involvement and investors’ expectations of unlocking value in the largest independent power producer have driven the stock since the beginning of 2017. NRG stock has risen more than 100% in the past year.

The Utilities Select Sector SPDR ETF (XLU) rose 12% during the same period.

AES (AES) has an estimated gain of more than 18% going forward. Analysts gave it a mean target price of $13.3—compared to its current market price of $11.2. AES is the most geographically diversified utility holding company among XLU. The stronger dollar and large exposure to unregulated operations dented AES’s earnings in the last few years. AES stock has lost 16% in the past year.

SCANA (SCG) has a mean target price of $64.3—compared to its current market price of $56.3. It implies a gain of 14.1%. SCANA abandoned the construction of the Santee Cooper nuclear power plant after Westinghouse’s bankruptcy. Moody’s downgraded its principal regulated utility South Carolina Electric & Gas, which fueled the stock’s fall. In the past year, SCANA corrected 25%.

FirstEnergy (FE) stock has lost 10% in the past year. It has a mean target price of $34.5—compared to its current market price of $31.1.


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